Not sure what to do about Closing Company

[Snooky]

If I'm understanding correctly, if I want the flexibility of going outside IR35 within the next two years I would be better off leaving the company as it is and just filing to Companies House once a year, or making it dormant? If I did this, how would I take the remaining capital out?

The most tax efficient way is likely to be as dividends, but they'll be taxed at your marginal rate - i.e. if they take you into a higher rate tax bracket or you're already in it with other income, you'll be paying the higher level of tax on the extra dividend income. But the company can pay it out however quickly or slowly the directors decide, so some people trickle out small dividends each year to take them just up to the higher rate threshold.

It all depends on your personal circumstances and needs - are you willing to pay more tax to get the funds out more quickly? Without meaning to appear rude, it sounds a little like you're not overly familiar with the workings of your company, so this is something you should definitely speak with your accountant about. That's what you pay them for.

[WTFH]

Looking at your post history, you seem to have opened and closed a few companies.

Speak to your accountant.

[northernladuk]

I am trying to find the best way of extracting the remaining capital in the business account, settling due taxes in the most efficient way possible. I wasn't aware of the two year thing, it's all very confusing...

If I'm understanding correctly, if I want the flexibility of going outside IR35 within the next two years I would be better off leaving the company as it is and just filing to Companies House once a year, or making it dormant? If I did this, how would I take the remaining capital out?

Correct. And in the meantime speak to your accountant and get them to explain it all to you.

[keymoo]

Why? What is the point of closing it all down? Avoiding banking fees? Avoiding accountant fees? Extracting cash in a tax efficient way?

I set my company up the second time to cost me nothing. Bank only charges me pence per transaction, and gives me Freeagent for free which makes all accounting and submitting a doddle, no accountant needed. So keeping my company open costs me £13 a year in confirmation statement.

I am trying to find the best way of extracting the remaining capital in the business account, settling due taxes in the most efficient way possible. I wasn't aware of the two year thing, it's all very confusing...

If I'm understanding correctly, if I want the flexibility of going outside IR35 within the next two years I would be better off leaving the company as it is and just filing to Companies House once a year, or making it dormant? If I did this, how would I take the remaining capital out?

[escapeUK]

I would like to close the business account and settle all Corporation tax, etc.

Why? What is the point of closing it all down? Avoiding banking fees? Avoiding accountant fees? Extracting cash in a tax efficient way?

I set my company up the second time to cost me nothing. Bank only charges me pence per transaction, and gives me Freeagent for free which makes all accounting and submitting a doddle, no accountant needed. So keeping my company open costs me £13 a year in confirmation statement.

[northernladuk]

I was going to MVL when i took an inside role which i thought would likely go on for a good few years. I was back using the ltd within 5 months as the inside role was a complete nightmare…

This. We've had endless posts from people short sightedly shutting the LTD just because they are going inside. 6 months later get an outside gig and they post on here what to do but there is nothing they can. Umbrella until the two years are up. Very very expensive mistake.

I never understand why people think one inside gig is reason to MVL. The nature of our work is temporary so why forget that when it comes to one inside gig.

[Ketto]

I was going to MVL when i took an inside role which i thought would likely go on for a good few years. I was back using the ltd within 5 months as the inside role was a complete nightmare…

[Maslins]

Thanks for the mentions Snooyk/WTFH

If you can get your company to a simple "cash only" situation, you should be able to get a much cheaper MVL than £4k. It is however a formal process, requiring a licensed insolvency practitioner, so even the smallest/simplest cases, when including associated costs, will cost you ~£1.5k-2k. A simple strike off would cost you just £8 (or £33 if done post 1 May 2024). You mention it was far cheaper when you previously closed companies, possibly this was why, it made sense to strike those off rather than liquidate them? The tax treatment can however be significantly different, hence why with >£25k final net assets people will often opt for the MVL over strike off.

As others have said, those tax breaks can be clawed back if you do an MVL, then start a similar business within 2 years. You suggest you'll likely continue with your existing inside IR35 role for 4 years, in which case this won't be an issue. However do bear it in mind if your circumstances changed. You'd be at risk if you started a new, outside IR35 contract within a couple of years of liquidating.

[keymoo]

£4k could be a lot if it was just the accountant's fees, but you've not told us what the breakdown of that figure is.

You might want to talk to Maslins as they have a good reputation for doing the job.

Thanks, sorry here's the breakdown from my accountant.

Liquidation fees are averaged around £4,000 however this will be confirmed by the liquidator. I can see from Freeagent that you company’s distributable profit is over £25,000. We are currently partnered with a company called SFP who specialises in liquidation. If you are happy to, we can pass your details along and someone from SFP will be in touch to talk through the liquidation process and the timeframe of this.

[WTFH]

I have had my Ltd Co since 2016 and had three clients with it, two of them overlapping at the same time. I have finished work for all the clients now, and am due to start a new contract inside IR35 from next week and will be operating through umbrella. This is a six month contract with very strong likelihood of renewals for at least 4 years.

I would like to close the business account and settle all Corporation tax, etc. I contacted my accountant and was told it would cost £4000 to close the company which I thought was outrageous. I've had two other companies before and not paid this kind of money. I guess have three options

1. Make the company dormant and close the business bank account. Settle all outstanding tax
2. Close the company and pay the high fees, and open a new one if I get an Outside IR35 contract in future
3. Close the company myself and save myself the fees.

Thoughts?

£4k could be a lot if it was just the accountant's fees, but you've not told us what the breakdown of that figure is.

You might want to talk to Maslins as they have a good reputation for doing the job.

[Snooky]

I have had my Ltd Co since 2016 and had three clients with it, two of them overlapping at the same time. I have finished work for all the clients now, and am due to start a new contract inside IR35 from next week and will be operating through umbrella. This is a six month contract with very strong likelihood of renewals for at least 4 years.

I would like to close the business account and settle all Corporation tax, etc. I contacted my accountant and was told it would cost £4000 to close the company which I thought was outrageous. I've had two other companies before and not paid this kind of money. I guess have three options

1. Make the company dormant and close the business bank account. Settle all outstanding tax
2. Close the company and pay the high fees, and open a new one if I get an Outside IR35 contract in future
3. Close the company myself and save myself the fees.

Thoughts?

Options I know of:

1. Pay out the remaining cash via dividend(s); you can do this as slowly or as quickly as you like, the only difference it might make is how much tax will be payable.
2. Go for a Members Voluntary Liquidation; this is generally more tax efficient but it's a *lot* slower, and if you start another company in the same line of work within 2 years, you lose the tax benefits it offers and the distributions will be considered as dividends rather than capital gains.

See https://www.mvlonline.co.uk/tax-benefits/ (if you choose an MVL, that company MVL Online will cost you a lot less than £4K, but your accountant may add in some extra fees for final accounts etc)

Others round these parts are far more knowledgeable and will hopefully be along shortly to offer better advice

[keymoo]

I have had my Ltd Co since 2016 and had three clients with it, two of them overlapping at the same time. I have finished work for all the clients now, and am due to start a new contract inside IR35 from next week and will be operating through umbrella. This is a six month contract with very strong likelihood of renewals for at least 4 years.

I would like to close the business account and settle all Corporation tax, etc. I contacted my accountant and was told it would cost £4000 to close the company which I thought was outrageous. I've had two other companies before and not paid this kind of money. I guess have three options

1. Make the company dormant and close the business bank account. Settle all outstanding tax
2. Close the company and pay the high fees, and open a new one if I get an Outside IR35 contract in future
3. Close the company myself and save myself the fees.

Thoughts?